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BoE data shows sluggish UK mortgage activity in Q4 2014

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Growth in UK mortgage lending activity was sluggish during Q4 of last year, according to the joint quarterly mortgage lenders and administrators (MLAR) statistics from the Bank of England (BoE) and the Financial Conduct Authority (FCA). According to analysts, however, market activity is set to pick up this year, mostly due to increased consumer demand.
The report shows that the total value of outstanding residential loans was £1,260 billion, a slight increase of 0.3 percent from Q3 and 1.7 percent year-on-year growth. Gross advances, however, dropped 8.1 percent from the previous quarter to £51.3 billion, and were 0.2 lower than during the same period of last year.
Net advances declined from £9 billion to £8.1 billion year-on-year, while new commitments contracted from £53.6 billion during the previous quarter to £46.3 billion in Q4 2014. This was also an eight percent year-on-year decrease. The overall average interest rate on total amounts outstanding decreased by three basis points to 3.25 percent in Q4 2014, the lowest since the series started back in 2007. The proportion of gross advances at over 90 percent loan-to-value ratio decreased by 0.5 percentage points over the quarter to just 3.8 percent in Q4 2014.

Brian Murphy, head of lending at Mortgage Advice Bureau (MAB), claims that even though mortgage activity slowed down in Q4 2014, following the 8.1 percent drop in gross advances compared to the previous quarter, the market is set for an increase in activity this year. According to him, the growth in activity is likely to increase specifically in terms of demand from the consumers. Murphy explains that given that the average interest rate on total amounts outstanding has dropped to its lowest level in over seven years, consumers continue to be the winners in the mortgage price war.
Murphy claims that the affordability of mortgages “is certainly swinging in consumers’ favour. However, for those with small deposits, there is definite room for improvement. The proportion of gross advances at a loan-to-value of over 90% fell to just 3.8% in Q4 2014. While the Help to Buy scheme has helped to prop up higher LTV lending, it continues to be underrepresented in the market.”

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